Ownership of Sydney`s high-end retail centre has changed hands as Vicinity Centres and Singapore-based sovereignty wealth fund government investment fund (GIC) have exchanged more than 1 billion yuan worth of assets, including Queen Victoria Building,The Strand and Chatswood Chase.
This is Sydney CBD`s largest retail asset exchange and ownership change, which will significantly increase Vicinity`s CBD retail business on the east coast. Vicinity`s direct exposure to Sydney`s downtown shopping mall assets rose from 11% to 15%.
Some tenants will also adjust, although the main tenants of all assets are restaurants and service retailers, such as mobile phone and accessories merchants.
Under the agreement, Vicinity will be responsible for managing QVB,The Strand Arcade and The Galeries, located at Park St 2, while GIC will own 49 percent of Sydney`s North Bank Chatswood Chase Shopping Mall.
Overall, Vicinity paid 562.3 million yuan for 50 percent of Sydney`s three urban shopping malls, and GIC paid 562.3 million yuan for a stake in Chatswood Chase. The respective trades yield about 5%.
Vicinity`s outgoing chief executive, Angus McNaughton, said the two companies had been discussing asset swap deals for months, a "win-win" situation.
"this is a very attractive deal for us, allowing us to move into a strong Sydney CBD retail space. We have Emporium shopping malls in Melbourne and shopping malls in Brisbane, but we don`t have these assets in Sydney. It will boost our revenue growth and expand our footprint. "
"the traffic through Sydney`s CBD Shopping Centre is about 60 million a year, including three major growing consumer groups: office white-collar, tourists and local residents," Mcnaughton said. This year they spent 590 million yuan in three shopping malls. "
"the retail sales at Sydney`s CBD Mall are very efficient, with average retail sales of 23,889 yuan per square meter, rolling annual sales of (MAT) up 2.4 percent, and MAT growth of 4 percent for the centre as a whole."
Retail analysts endorsed the deal, saying it was good for Vicinity revenue.
Michael Vincent, an analyst at CLSA, said that while the Australian retail industry faces structural challenges, an increase in CBD assets will make Vicinity`s operations more flexible.
Vicinity has retained a 51 percent stake in Chatswood Chase to preserve its exposure to its growth potential, while GIC`s presence as a capital partner has helped reduce the risk of the project.
